Arel Communications and Software Ltd. Reports Second Quarter 2005 Results.ATLANTA Atlanta (ətlăn`tə, ăt–), city (1990 pop. 394,017), state capital and seat of Fulton co., NW Ga., on the Chattahoochee R. and Peachtree Creek, near the Appalachian foothills; inc. 1847. -- Arel Communications and Software Ltd. (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : ARLC ARLC Automatic Revolving Letter of Credit ), a technology leader in universal voice, video and data communications data communications, application of telecommunications technology to the problem of transmitting data, especially to, from, or between computers. In popular usage, it is said that data communications make it possible for one computer to "talk" with another. for interactive conferencing See teleconferencing. , collaboration Working together on a project. See collaborative software. and training applications, reported results for the second quarter ended June June: see month. 30, 2005. Revenue for the second quarter was $1,080,000 versus $754,000 in the first quarter of 2005, and $1,792,000 in the second quarter of 2004. Net loss for the quarter was $(170,000), or $(0.01) per share, versus $(1,563,000), or $(0.12) per share, in the first quarter of 2005 and $(980,000), or $(0.07) per share, in the second quarter of 2004. The quarter's results include a one time capital gain of $1,331,000, or $0.10 per share, from the sale of the company's investment in ArelNet LTD. Philippe Szwarc, chief executive officer of Arel, stated, "Our sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen improved quarterly results speak to our continued progress in reinforcing re·in·force also re-en·force or re·en·force tr.v. re·in·forced, re·in·forc·ing, re·in·forc·es 1. To give more force or effectiveness to; strengthen: The news reinforced her hopes. our leadership position in the rich media conferencing and collaboration market. In addition to winning new license sales in the second quarter, we have cultivated cultivated, n in herbal medicine, used to describe plants that are commercially farmed rather than collected from the wild. and strengthened our relationships with strategic software and telecom vendors, and broadened our focus on expanding our relationships with service providers. As a consequence, our Spotlight Spotlight can refer to at least three types of lighting:
Traction is the use of a pulling force to treat muscle and skeleton disorders. Purpose Traction is usually applied to the arms and legs, the neck, the backbone, or the pelvis. both with new end-users and channel providers. During Q2, we launched a total of 15 pilot programs into new potential customers and new signed end-user (job) end-user - The person who uses a computer application, as opposed to those who developed or support it. The end-user may or may not know anything about computers, how they work, or what to do if something goes wrong. contracts combined, and launched 4 selling agreements with new channel partners in European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. and Asian markets. Through both our direct and channel selling efforts, we are beginning to see encouraging signs of customer acceptance among Fortune 1000 companies, a key positive step." Mr. Szwarc concluded, "As a growing company, Arel remains subject to the challenges inherent in building acceptance during this nascent nascent /nas·cent/ (nas´ent) (na´sent) 1. being born; just coming into existence. 2. just liberated from a chemical combination, and hence more reactive because uncombined. development stage of the rich-media conferencing and collaboration market. However, we are focused on prudent investment in our growth, and have managed expenses and conserved con·serve v. con·served, con·serv·ing, con·serves v.tr. 1. a. To protect from loss or harm; preserve: cash while building an active and multi-faceted sales capability. Our recent customer wins, growing pipeline of pilot projects and successful acceptance tests are indicative indicative: see mood. of our success in selling directly to end-users while simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics developing effective channel partnerships. Our progress to date strongly indicates that Arel's Spotlight(TM), as the best of breed solution, is beginning to transform workstyles in high-complexity sectors by improving real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. collaboration, communication, and productivity. Our focus for the rest of 2005 is to continue to build upon these successes to deliver improving financial proofs over time." Revenues for the first six months of 2005 were $1,834,000 versus $2,794,000 in the first six months of 2004. Net loss for the first six months of 2005 was $(1,733,000), or $(0.13) per share, versus $(2,026,000), or $(0.15) per share, for the first six months of 2004. Conference Call Arel's management will host a conference call at 10:00 a.m. ET today to discuss earnings and corporate activity. Please call the following dial-in numbers to participate: United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. (888) 527-1593 International Participants (706) 679-7685 Conference ID: 8266503 The public is invited to listen to the live webcast of the conference call. For details, visit Arel's website at www.arelcom.com. An archive (1) A file that contains one or more compressed files. Most archive formats are also capable of storing folders in order to reconstruct the file/folder relationship when decompressed. See archive formats. of the on-line broadcast will be available on the website through August 18, 2005. About Arel Communications and Software: Arel Communications and Software, a technology leader in interactive web communications, develops, markets and sells a universal conferencing software solution for enterprise-wide deployment Installing, setting up, testing and running. This military term, which means the placement of troops and equipment in the field, is widely used with computers as an alternate to the word "implementation. of integrated voice, video and data web conferencing/collaboration and training applications. Designed around Arel's Integrated Conferencing Platform(TM) (ICP (1) (Internet Cache Protocol) A protocol used by one proxy server to query another for a cached Web page without having to go to the Internet to retrieve it. See CARP and proxy server. ) core software, the Arel Spotlight(TM) application suite facilitates collaboration for key business processes such as corporate and marketing communications Marketing communications (or marcom) are messages and related media used to communicate with a market. Those who practice advertising, branding, direct marketing, graphic design, marketing, packaging, promotion, publicity, sponsorship, public relations, sales, sales , distance learning, product development, customer relationship management, and supply chain management by allowing dispersed dis·perse v. dis·persed, dis·pers·ing, dis·pers·es v.tr. 1. a. To drive off or scatter in different directions: The police dispersed the crowd. b. enterprise users to collaborate in real time with synchronized syn·chro·nize v. syn·chro·nized, syn·chro·niz·ing, syn·chro·niz·es v.intr. 1. To occur at the same time; be simultaneous. 2. To operate in unison. v.tr. 1. voice, video and data. Arel's scalable, secure, and network-friendly universal conferencing solution is becoming the solution of choice for large enterprises moving from 'off-network' pay per usage services to 'on-network' solutions for greater control, cost-savings and integration with internal systems. For additional information, please visit www.arelcom.com. Certain statements made herein that are not historical are forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. The words "estimate", "project", "intend", "expect", "believe", "hopeful" and similar expressions are intended to identify forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . These forward-looking statements involve known and unknown risks and uncertainties. Many factors could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements that may be expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements, including, among others, changes in general economic and business conditions, inability to maintain market acceptance to the Company's products, inability to timely develop and introduce new technologies, products and applications, rapid changes in the market for the Company's products, loss of market share and pressure on prices resulting from competition, introduction of competing products by other companies, inability to manage growth and expansion, loss of key partners, inability to attract and retain qualified personnel, inability to protect the Company's proprietary technology and risks associated with the Company's international operations Internal Operations (I.O., IO or I/O) is a fictional American Intelligence Agency in Wildstorm comics. It was originally called International Operations. I.O. first appeared in WildC.A.T.S. volume 1 #1 (August, 1992) and was created by Brandon Choi and Jim Lee. and its location in Israel Israel, in the Bible Israel (ĭz`rēəl, ĭz`rāəl) [as understood by Hebrews,=he strives with God], according to the book of Genesis, name given to Jacob as eponymous ancestor of the Hebrews, the chosen people of God. . For additional information regarding these and other risks and uncertainties associated with the Company's business, reference is made to the Company's reports filed from time to time with the Securities and Exchange Commission. All trademarks recognized.
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30 Dec. 31,
-------------
2005 2004 2004
------------------------
(Unaudited) (Audited)
------------------------
U.S. $ in thousands
------------------------
A s s e t s
CURRENT ASSETS:
Cash and cash equivalents 973 3,873 3,123
Short term investments 1,041 2,215 704
Accounts receivable:
Trade 2,687 3,809 1,681
Other 492 757 484
Investment in ArelNet Ltd. 507 1,070
Inventories 709 405 791
------------------------
T o t a l current assets 5,902 11,566 7,853
------------------------
SEVERANCE PAY FUNDS 433 523 601
------------------------
PROPERTY, PLANT AND EQUIPMENT, NET 284 459 352
------------------------
OTHER ASSETS 79 96 86
------------------------
T o t a l assets 6,698 12,644 8,892
========================
Liabilities and shareholders' equity
CURRENT LIABILITIES:
Current maturities of long-term loan - 41 -
Accounts payable and accruals:
Trade 395 390 332
Deferred revenues 621 617 104
Employees related obligations 778 669 709
Other 1,086 3,211 1,894
------------------------
T o t a l current liabilities 2,880 4,928 3,039
------------------------
LONG-TERM LIABILITIES:
Long-term loan 500 - -
Income tax payable 874 - 1,068
Accrued severance pay liability 658 733 840
------------------------
T o t a l long-term liabilities 2,032 733 1,908
------------------------
T o t a l liabilities 4,912 5,661 4,947
------------------------
SHAREHOLDERS' EQUITY:
Share capital 4 4 4
Additional paid-in capitol 54,271 54,270 54,271
Accumulated other comprehensive income 163 382 945
Accumulated deficit (52,652) (47,673) (51,275)
------------------------
T o t a l shareholders' equity 1,786 6,983 3,945
------------------------
T o t a l liabilities and
shareholders' equity 6,698 12,644 8,892
========================
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Six Three
months months
ended ended
June 30 June 30
---------------------------
2005 2004 2005 2004
---------------------------
(Unaudited) (Unaudited)
---------------------------
U.S. $ in thousands, except
loss per share
---------------------------
REVENUES:
Sales 722 1,464 527 1,178
Services 1,112 1,330 553 614
---------------------------
1,834 2,794 1,080 1,792
Cost of sales and services 814 1,404 455 946
---------------------------
Gross profit 1,020 1,390 625 846
Research and development expenses - net 1,218 1,000 611 417
Selling, general and administrative
expenses 3,135 2,807 1,555 1,354
Income from settlement with W2COM 411
---------------------------
Operating loss (3,333)(2,006)(1,541) (925)
Financial income (expenses) - net 41 (20) 40 (55)
Capital gain from sale of investment in
ArelNet Ltd 1,331 - 1,331 -
---------------------------
Net loss before income tax benefit (1,961)(2,026) (170) (980)
Income tax benefit 228 - - -
---------------------------
Net loss for the period (1,733)(2,026) (170) (980)
===========================
Basic and Diluted loss per share (0.13) (0.15) (0.01)(0.07)
AREL COMMUNICATIONS AND SOFTWARE LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months Year
ended ended
June 30 Dec. 31,
------------
2005 2004 2004
---------------------
(Unaudited) (Audited)
---------------------
U.S. $ in thousands
---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss for the period (1,733)(2,026)(5,628)
Adjustments required to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization of property
and equipment 70 129 224
Capital gain on sale of investment in
ArelNet Ltd. (1,331)
Capital gain on sale of property and
equipment 1 - 59
Trading marketable securities, net 127 40 34
Allowance for doubtful accounts (60) (15) 363
Accrued employee rights upon retirement -
net (14) (181) (152)
Other - net 1 (1) (8)
Changes in operating asset and liability
items:
Decrease (increase) in trade receivable
(before Allowance for doubtful accounts) (946) (696) 1,054
Decrease (increase) in other accounts
receivable 78 (143) 215
Decrease (increase) in inventories 82 129 (257)
Increase (decrease) in trade payables 63 (99) (157)
Increase (decrease) in deferred revenues 517 323 (190)
Increase (decrease) in employees related
obligations 69 63 103
Increase (decrease) in other liabilities
(including long-term) (646) 77 (172)
---------------------
Net cash used in operating activities (3,722)(2,400)(4,512)
---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Short-term bank deposit - net 477 2,351 3,868
Purchase of property, plant and equipment (31) (167) (214)
Proceeds from sale of property ,plant and
equipment 28 - -
Sale of investment in ArelNet Ltd. 592 - -
Collection of long-term loan to an employee 4 4 9
Amounts carried from other assets 2 82 7
---------------------
Net cash provided by investing activities 1,072 2,270 3,670
---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term loan 500 - -
Repayment of long-term loan - (9) (48)
Issuance of share capital - 78 78
Exercise of options - 37 38
---------------------
Net cash provided by financing activities 500 106 68
---------------------
DECREASE IN CASH AND CASH EQUIVALENTS (2,150) (24) (774)
---------------------
BALANCE OF CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,123 3,897 3,897
---------------------
BALANCE OF CASH AND CASH EQUIVALENTS AT END OF
PERIOD 973 3,873 3,123
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